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paying off mortgage with unsecured loan.

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  • Question: paying off mortgage with unsecured loan.

    HI All,
    im about to pay off my mortgage with couple of unsecured loans, and was wondering if i would be able to discharge the unsecured loans and still be able to keep my property and the rest of my belongings if it comes to filing for bankruptcy?
    would appreciate any knowledgeable comments.
    thanks.

  • #2
    This sounds like fraud if you filed for bankruptcy, not even considering your exemptions. Unsecured loans typically do not have lower interest rates than a mortgage loan that is secured to your property.
    Any information posted by me is for general informational purposes only. While I am an attorney, I am not YOUR attorney and any information I provide is not legal advice.

    Comment


    • #3
      Of course it's fraud, and this sort of tactic has been discussed here before, usually regarding student loans. Typically, the question is "Can I use my credit cards to pay off my student loans and then discharge the debt in bankruptcy?" and the answer is "no".

      No one here is going to advise you to take on debt that you know you aren't going to pay for the purpose of discharging that debt in bankruptcy. That is considered fraud, and more importantly, creditors will object to having their debt discharged, thus denying you the benefits of bankruptcy. (Note that we are talking about attempts to pay off, refinance, or otherwise convert a secured or non-dischargeable debt into an unsecured, dischargeable debt. Many people have made some monthly payments toward a student loan or secured debt using a credit card, or the proceeds of an unsecured loan while they were still solvent and keeping their debts current and then later on end up needing to file, and that is generally not a problem.)

      Comment


      • #4
        Good day to all,
        thank you so much for your knowledgeable info's and advice's , it’s definitely appreciated.
        i might have asked my question the wrong way, what i meant was that if it would be a good idea to pay off the mortgage with the unsecured loan and keep making payments for the unsecured loan since the unsecured loan that i have has the exact same interest rate as my mortgage due to my high Fico score, so i won’t be losing money because of higher interest rate, the talk of bankruptcy is for years ahead, not to just payoff the mortgage and right away file bankruptcy....That obviously is a fraud like you good people mentioned. The bankruptcy idea is for years ahead (ONLY) if i have to, just in case if i run in to any problems in the future.
        Would really appreciate your comments and advice's, and sorry again for the inconvenience and thank you again for your valuable time.
        Cheers.

        Comment


        • #5
          What do you hope to accomplish by converting secured debt to unsecured debt?

          If you itemize your income tax deductions, that would be a good reason not to do it. Also, if you want to refinance in the future, the terms of refinancing the unsecured debt will not be as favorable as refinancing a mortgage.
          LadyInTheRed is in the black!
          Filed Chap 13 April 2010. Discharged May 2015.
          $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

          Comment


          • #6
            What you propose makes no sense at all. Why would you take another loan, an unsecured loan, when you get to deduct the interest on a mortgage for tax purposes? There's no strategic reason, except to try to discharge the unsecured loan later and maybe avoid issues with the mortgage -- which if you're pre-planning and talking about bankruptcy in the future, makes my lizard brain tingle. There's nothing wrong with bankruptcy pre-planning. There is something wrong with bankruptcy fraud (deceit).

            Maybe we're still missing something in the question???
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              This sounds like fraud if you filed for bankruptcy, not even considering your exemptions. Unsecured loans typically do not have lower interest rates than a mortgage loan that is secured to your property.[/QUOTE]

              Good day to all,
              thank you so much for your knowledgeable info's and advice's , it’s definitely appreciated.
              i might have asked my question the wrong way, what i meant was that if it would be a good idea to pay off the mortgage with the unsecured loan and keep making payments for the unsecured loan since the unsecured loan that i have has the exact same interest rate as my mortgage due to my high Fico score, so i won’t be losing money because of higher interest rate, the talk of bankruptcy is for years ahead, not to just payoff the mortgage and right away file bankruptcy....That obviously is a fraud like you good people mentioned. The bankruptcy idea is for years ahead (ONLY) if i have to, just in case if i run in to any problems in the future.
              Would really appreciate your comments and advice's, and sorry again for the inconvenience and thank you again for your valuable time.
              Cheers.

              Comment


              • #8
                Of course it's fraud, and this sort of tactic has been discussed here before, usually regarding student loans. Typically, the question is "Can I use my credit cards to pay off my student loans and then discharge the debt in bankruptcy?" and the answer is "no".

                No one here is going to advise you to take on debt that you know you aren't going to pay for the purpose of discharging that debt in bankruptcy. That is considered fraud, and more importantly, creditors will object to having their debt discharged, thus denying you the benefits of bankruptcy. (Note that we are talking about attempts to pay off, refinance, or otherwise convert a secured or non-dischargeable debt into an unsecured, dischargeable debt. Many people have made some monthly payments toward a student loan or secured debt using a credit card, or the proceeds of an unsecured loan while they were still solvent and keeping their debts current and then later on end up needing to file, and that is generally not a problem.)
                Good day to all,
                thank you so much for your knowledgeable info's and advice's , it’s definitely appreciated.
                i might have asked my question the wrong way, what i meant was that if it would be a good idea to pay off the mortgage with the unsecured loan and keep making payments for the unsecured loan since the unsecured loan that i have has the exact same interest rate as my mortgage due to my high Fico score, so i won’t be losing money because of higher interest rate, the talk of bankruptcy is for years ahead, not to just payoff the mortgage and right away file bankruptcy....That obviously is a fraud like you good people mentioned. The bankruptcy idea is for years ahead (ONLY) if i have to, just in case if i run in to any problems in the future.
                Would really appreciate your comments and advice's, and sorry again for the inconvenience and thank you again for your valuable time.
                Cheers.

                Comment


                • #9
                  Originally posted by justbroke View Post
                  What you propose makes no sense at all. Why would you take another loan, an unsecured loan, when you get to deduct the interest on a mortgage for tax purposes? There's no strategic reason, except to try to discharge the unsecured loan later and maybe avoid issues with the mortgage -- which if you're pre-planning and talking about bankruptcy in the future, makes my lizard brain tingle. There's nothing wrong with bankruptcy pre-planning. There is something wrong with bankruptcy fraud (deceit).

                  Maybe we're still missing something in the question???
                  thank you my friend for your reply back, we are not really missing anything here, the government only pays back one third of your interest paid not the entire interest, and if that was the case, i pay over $11000 in interest on the mortgage per year while getting only back only about $3300, and since im a single person i wont get nearly as much as other married couples with kids might, it would have been a great option if the government would give all of it back however unfortunately thats not the way that it works, and besides my property is going to be rented by middle of next month and so from next year i wont be getting any interest back from the taxes since the property wont be my primary residence.
                  Like you mentioned my friend there`s nothing wrong with pre-planning for bankruptcy for years ahead just to be on the safe side and or if it even comes to that, however i dont think the idea is a fraud since i have already mentioned in my replies to other members that i will be paying the monthly payment for the unsecured loan, the talk of bankruptcy if it should get to that point which im hoping it wont, will be for years ahead which generally shouldn't be a problem.
                  Now if payoff the mortgage and file bankruptcy right away without even making any payments on the loan then yes that way it will be very obvious that it is a fraud. from the 5 bankruptcy attorneys that i have explained my case to, none of them ever used the word Fraud , and even said that it would be dis-chargeable if it comes to that point.
                  i personally think the biggest Fraud in our country is the Obamacare ACA where the government is taking peoples extra money on insurance to cover the bills for millions of lousy couch potatoes on its bankrupt welfare system , and also the government forcing citizens to buy a certain product is basically Dictatorship... so please never feel bad for the government as the government never feels bad for its citizens.
                  thank you so much again for your reply and your valuable time and best of lucks to all members.
                  ​​​​​​​cheers.

                  Comment


                  • #10
                    Originally posted by shahin View Post


                    i personally think the biggest Fraud in our country is the Obamacare ACA where the government is taking peoples extra money on insurance to cover the bills for millions of lousy couch potatoes on its bankrupt welfare system , and also the government forcing citizens to buy a certain product is basically Dictatorship... so please never feel bad for the government as the government never feels bad for its citizens.

                    .....rolls eyes......



                    Final Payment 7/2016

                    Comment


                    • #11
                      As a reminder, and as stated in the Forum Rules, please keep all political discussions in the political discussions thread located here http://www.bkforum.com/forum/news-ge...cal-discussion. Let's stay on track!
                      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                      Status: (Auto) Discharged and Closed! 5/10
                      Visit My BKForum Blog: justbroke's Blog


                      I am not an attorney. Any advice provided is not legal advice.

                      Comment


                      • #12
                        1. Generally, unsecured loans compound interest differently than mortgages, so, you end up paying more interest on the unsecured loan.

                        2. Do you have the commitment that no matter how bad things get, you won't take out another 2nd mortgage or HELOC.

                        3. In terms of bankruptcy...this seems like an odd forum to bring this question if your intention is benign. Actual fraud does not have a cut off. Candidly, only true fraudsters think years in advance. The reality is, for 99% of those where bankruptcy enters their mind, they already need to file bankruptcy and probably should have filed 6 months prior to when they started thinking about it. You mention having spoke to 5 bankruptcy attorneys. There is no such thing as planning for bankruptcy years in advance (hell, corporation don't even do that) "if it comes to that." When I hear that, I see a person in DEEP denial about their current financial situation and is super unrealistic about their prospects. Your initial question was neither unclear nor ambiguous, you simply changed your tune after the responders stated that it is obvious fraud. If your goal is to stick it to the man, fine, but don't come here and be coy and think we have no clue what we are talking about.

                        What you are gambling on is whether anyone will make an issue of it. No one here can predict what would happen in a future bankruptcy whether it is filed months or years after the fact. It is gamble because at the end of the day, there is not much of a rational justification for making such a move. You would be gambling that if you make a payments for a couple years, no one will inquire. The thing is, if they do, you likely lose. The thing is, you appear to have actual intent and given that such a move is very out of the ordinary, the circumstances could be prove intent.

                        4. Typically, the unsecured loan will have a shorter term (length) than the existing 2nd mortgage or HELOC, so the payment is, usually higher, but it depends on the scenario.

                        5. Then there is the asset issue of the house, in particular, the equity. If things do go south, do you have enough homestead protection to cover the equity. Also, you now free up that equity for creditors who obtain judgments against you.

                        Even completely financially stable people don't do this. That should tell you something.

                        Maybe your question is a benign hypothetical, that you are perfectly, financially stable, with good income, very little unsecured debt and all you debt wise have is your mortgage...but, that begs the question as to why you have spoken to 5 bankruptcy attorneys and are on this forum. If walks and quacks like a duck...you know the rest.

                        Comment

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